Updated: Section 1557 Employer-Sponsored Group Health Plans

Section 1557 of the Affordable Care Act (ACA) has been surrounded by controversy for years. Our previous blog, Section 1557 and the SCOTUS Decision—Implications for Employer-Sponsored Group Health Plans, addressed the U.S. Department of Health and Human Services (HHS) 2020 final rule implementing Section 1557. The 2020 final rule clarified the scope of Section 1557 in keeping with pre-existing civil rights statutes and regulations prohibiting discrimination based on race, color, national origin, sex, age and disability.  At that time, the assumption was that additional guidance would be forthcoming.

Fast forward to May 10, 2021—HHS issued a notification of interpretation and enforcement of ACA Section 1557 prohibiting discrimination based on sexual orientation and gender identity. HHS said the new interpretation is made pursuant to the U.S. Supreme Court decision in Bostock v. Clayton County and other civil rights statutes, such as Title IX of the Education Amendments of 1972 and the Civil Rights Act of 1964.

The notification informs the public about how and why the government will apply a law to covered health plans. It will guide the Office for Civil Rights (OCR) in processing complaints and conducting investigations. The focus is on enforcement of the rules prohibiting sex discrimination on the basis of sexual orientation and gender. It does not extend to other Section 1557 regulatory changes made last year that addressed matters other than sex discrimination.

Minimal effect on employer-sponsored group health plans

The enforcement announcement impacts very few employer-sponsored group health plans directly since most group health plans are not subject to Section 1557. Group health plans that do not receive federal financial assistance and are not principally engaged in the business of providing health care are not considered covered entities subject to Section 1557.

Coverage of additional benefits not required

The notification does not require group health plans to cover additional benefits (e.g., hormone therapy, surgical procedures and other treatments related to gender transition/sex reassignment) for LGBTQ+ individuals who are not already covered under the plan, although employers may cover those benefits if they choose to.

CEBS

No specific examples of discrimination

The notification does not provide additional guidance or details on what it means to not discriminate based on sexual orientation and gender identity as was done in a previous 2016 rule that included examples. Group health plans should review all policies and practices to ensure that they are not discriminating based on sexual orientation or gender identity.

Fully insured plans, take note

Keep in mind, other state nondiscrimination rules may apply to fully insured and self-insured non-ERISA plans.

If a plan is subject to Section 1557, what steps should those plans take now?

  • Plans must continue to provide any services and procedures already covered under the plan to all participants for whom the treatment is medically necessary and appropriate without consideration of a participant’s gender identity.
  • Plans that provide coverage to same-sex domestic partners must also provide coverage to opposite-sex domestic partners. Likewise, those providing coverage to opposite-sex domestic partners must provide coverage to same-sex domestic partners.
  • Employers should consult with their legal counsel to understand coverage requirements.

What does the future hold?

  • Future litigation is likely. Lawsuits remain over pre-2020 rules to implement Section 1557. HHS said OCR will enforce the rules in a manner consistent with other laws and existing court orders, which sets the stage for additional litigation and revisions to the Section 1557 regulations.
  • HHS intends to enforce this interpretation prohibiting plans subject to Section 1557 from discrimination based on sexual orientation or gender. It remains to be seen whether federal courts will confirm that this interpretation prohibiting discrimination based on sexual orientation or gender applies to all plans through Title VII of the Civil Rights Act because of Bostock.
  • HHS and/or other agencies may release additional rulemaking and guidance.

Stay tuned to the International Foundation and our Future of ACA web page for updates and related information.

[Related Reading: How Gender Inclusivity Can Benefit Plan Sponsors and Members]

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.

Amanda Wilke, CEBS
Information/Research Specialist at the International Foundation

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